Great Lakes Dredge & Dock Corporation (GLDD - Free Report) has been riding high on the back of strong dredging operations, in particular on its Charleston II project, high equipment utilization, solid project execution and savings from its restructuring plan.
Shares of the company have rallied more than 34% in a year’s time against its industry’s fall of 30.8%. This outperformance was backed by solid earnings surprise history of the company, having surpassed the Zacks Consensus Estimate in all the past four quarters, with the average being 157.5%.
Meanwhile, earnings estimates have been upwardly revised over the past few weeks, suggesting that sentiments on Great Lakes Dredge & Dock are moving in the right direction. The Zacks Consensus Estimate for 2018 has been revised from a loss of 7 cents per share to earnings of 3 cents over the past 60 days. Also, the company’s 2019 EPS estimate has been revised almost 88% upward in the same time frame. This signifies that analysts are optimistic about its future earnings growth.
Let us delve deeper into other factors that make this Zacks Rank #1 (Strong Buy) stock a profitable pick. You can see the complete list of today’s Zacks #1 Rank stocks here.
What Makes Great Lakes a Solid Bet?
Strong Execution Drives Third-Quarter Results: This leading provider of dredging services in the United States, and major provider of environmental and infrastructure services reported solid third-quarter results. Contract revenues grew 25% year over year, courtesy of higher dredging activity, mainly on capital projects, which more than offset continued weakness in E&I activity. Better project execution and the restructuring program pushed adjusted EBITDA margin to 19.1% from 13.5% in the year-ago period and 8.2% in the second quarter of 2018.
Strong Restructuring Initiatives: The company remains on track with its restructuring program that is expected to have completed in 2018. In total, the program is targeted to boost EBITDA by a total of $40 million as follows: streamlining overhead/G&A expenses by $15 million, optimizing asset base by $10 million and improving operating efficiency by $16 million. The company’s restructuring efforts continue to impact results positively, with $22.5 million of cost savings achieved since the beginning of 2018.
Additionally, owing to the restructuring program and a better project mix, gross profit of $42.13 million in the third quarter was much higher than $19.82 million recorded in the year-ago quarter, and gross profit margin expanded by 10.5 percentage points to 20.6% from 10.2% a year ago.
Solid Growth Prospects: Great Lakes has solid growth prospects, as is evident from the Zacks Consensus Estimate for 2018 earnings of 3 cents per share, which are expected to grow 111.1% year over year. Meanwhile, the company’s earnings for 2019 are expected to jump by a significant 1,400%. Overall, it constitutes a great pick in terms of growth investment, supported by a Growth Score of A.
VGM Score: Great Lakes has a VGM Score of A. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 (Buy) make a solid investment choice.
Other Stocks to Consider
Other top-ranked stocks in the Construction sector include MasTec, Inc. (MTZ - Free Report) , Masco Corporation (MAS - Free Report) and United Rentals, Inc. (URI - Free Report) , each carrying a Zacks Rank #2.
MasTec surpassed earnings estimates in all the trailing four quarters, resulting in average positive surprise of 23.8%.
Masco and United Rentals’ 2019 earnings are expected to grow 12.8% and 21.3%, respectively.
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